I've come to seek some very serious financial advice. I'm in my mid thirties but I've never borrowed a penny from an official institution. I'm not quite a pikey but I'm not that far removed if I'm being honest. I've grown up in a culture of working for cash and buying things for cash. Debt is a dirty word in my family and I've always lived within my means.
I've been quite frugal over the years and have managed to put together about 90k in savings. My employment history is sketchy at best and although I've been working since I left school, there are some serious gaps in the official records when it comes to my income.
For the past six months I've been self employed with about 80k a year coming in. All declared and above board.
I've always assumed that I couldn't get a mortgage and I'm still doubtful but I thought it might be worth asking some strangers whether I'm right.
My current overheads are pretty low and at a push I can save a good few grand a month after tax and rent etc. That means I could potentially have a lot more in the bank in the near future.
I desperately want to own a house and I know I could buy something tiny in a shit place with the money I have but I've recently been wondering what I could get if a bank would lend me a big chunk. I don't want anything fancy but it would be nice to have some space in a nice area.
As I said I know nothing about debt so my main questions are do I have any chance of getting a mortgage with only 6 months of official financial stability (and no credit history), and if so, how much would they lend me with 90ish as a deposit?
You can normally borrow about 4.5x of your salary on top of your deposit. You'll probably need a longer history of income, especially if self-employed. That could take a year or two.
It might be worth getting a credit card and spending a bit each month, making sure it's paid off in full to avoid interest. It's an easy way to demonstrate that you manage money well. Having no evidence of debt management can be a negative thing, I suppose the logic is 'if we can't see you managing small debts, we're unsure about your personality with larger debts'.
I often check both moneysavingexpert and r/ukpersonalfinance because they'll have a lot of info on this sort of thing.
>>7464 Okay - a mortgage broker will definitely help as they will have actual offers from lenders. I can recommend Charles Cameron.
There are three variables to a mortgage - how much you earn (£80k), how much deposit you have (£90k) and how affordable your monthly payments are going to be. On the downside, you're self-employed, which means you have to do a little bit more proving you can still earn that much in the future. Your £90k deposit is a very good upside though. You can generally borrow between 3x and 5x your earnings depending on how dependable they are and the lender/offer.
On the affordability side, the general rule of thumb is you should be spending no more than 28% of your monthly income after tax is paid, which for you is about 1200 quid per month. The last variable is how many years you are taking the mortgage for, this varies between 10 and 30 years. Based on all that I would think you could be getting a mortgage of about £250k which added to your deposit means you can buy a property of £300k-ish.
You should get a mortgage that allows you to overpay - if you're as good a saver as you say, this means that you can overpay it every month, which dramatically shortens the term. There are mortgages (offset mortgages) that also allow you to keep your savings and balance the mortgage against it - again, a broker will help here as they can get actual offers to talk about.
When you speak to a broker, and they talk to lenders, you'll have to do some extra work because of being self-employed and the fact that rules have tightened up around affordability recently, but you have a good deposit and that really helps.
>>7466 >It might be worth getting a credit card and spending a bit each month, making sure it's paid off in full to avoid interest. It's an easy way to demonstrate that you manage money well. Having no evidence of debt management can be a negative thing, I suppose the logic is 'if we can't see you managing small debts, we're unsure about your personality with larger debts'.
Bumping this thread because I'm curious of how true it is. Like OP I've always avoided debt (student loan aside) and I've got more to show as a result because I've never paid interest and always had sizeable savings for anything that goes wrong. Plus I didn't want to be enslaved to debt in my youth.
It seems like something that would be more applicable to the American market but numerous older people told this to me growing up, that I should just buy things on credit and then pay them off because it's essential to home ownership. It would be satisfying to know that these people were idiots.
>It would be satisfying to know that these people were idiots.
Unfortunately not. The files held by credit reference agencies only include information on credit you've taken out. If you've always avoided debt, then lenders have very little information on your ability to reliably repay it. You might be very prudent, or you might have avoided debt because you're bad with money know that you'd get into trouble. Small, occasional borrowing that is reliably repaid proves that you can be trusted with a bigger loan. Your energy and phone bills do go on your credit file, but it's useful to have some other borrowing history to give lenders more information.
Besides that, if you're good at managing money you can substantially benefit by using rewards credit cards for your spending - you'll get cashback or vouchers for free, just for buying what you would normally buy.
>>7467 Thirded. The basic info provided there is a really good for anyone starting to get serious about tackling their money situation. The same advice can be found elsewhere, but it's fairly clear and concise and makes for a good springboard to learn more. It's like a beginners work out guide, the hard part isn't to Do The Thing, it's to stick with it and some people just drew the short straw and cannot do it. That's a different topic, though.
>>7876 At risk of being seen as tedious, but:
> you'll get cashback or vouchers for free
Free in the same way the NHS is "free" at the point of use. The payment operators take a cut of every payment[1] you make and they offer those deals because it makes them money.
[1] They operate the infrastructure to support those payements, including anti-fraud etc., so they're not just "skimming off the top". In some ways it's a race to the bottom, however: vendors price in those premiums so either you make use of what you can get or you pay it anyway and don't.
>>7876 Okay I've started the ball rolling on this.
I initially signed up to the money saving expert credit club that gives you an adhoc rating that I'd recommend. It only checks to a level that doesn't tip off credit agencies and naturally all credit agencies operate different (and secret criteria) but it's a start and a legit free service.
https://www.moneysavingexpert.com/creditclub/
Now I've been approved for a credit card and set up the direct debit to clear the balance. My first purchase being some lovely lip-licking huel and making a note to keep it under 7% credit utilisation. Thing is, it seems like the direct debit clears on day 30 rather than end of the month - do either of you know if that's monkey business or does everything work on a financial calendar as I suspect?
>>7966 >direct debit clears on day 30 rather than end of the month
Pretty normal - some companies allow you to set the date yourself, and you can always cancel the DD and do it by standing order on a date you prefer, but for peace of mind it's easier to just leave it and let it run in my experience.
>>7968 I always keep a positive balance on my credit card because I don't like owing money to people. Sometime's I'll have to make a second payment if my monthly spending is higher than budgeted but it beats being indebted.
I'm decently well off but it have a presumably atrocious credit rating due to my callousness and/or stupidity in my early 20s. I'm actually kind of scared to even look.
I've always heard that the best way to rebuild your credit is by doing stuff like having a credit card and paying it off every month. But I've also heard it's better to actually be slightly in debt and paying it off, because then you're seen as a desirable (ie profitable) customer. Where's the truth in all that?
Not wanting to hijack the thread but what should I be looking to do if I'm aiming for a mortgage in the next three to four years and I've got a couple of defaults in the past, but haven't touched credit since?
>>7970 I recommend checkmyfile.com as a place, for when you want to look and understand how the ratings work.
Different lenders want different things is the answer - you need some record of lending, but there are lenders who want people who pay everything off and keep no debt, and there are others looking for people who are happy to carry debt (and capable of paying it off) - just depends on their own risk appetite.
>>7969 I started thinking that I could cheat the system by paying any credit card purchases off right away. Then, of course, I found out that if you pay it off too often in a given month you equally look sloppy with money. A more cynical man might think this is all an elaborate scam to get people into debt - thereby making the balance sheets look better than they are while creating social control.
I've spent my whole life ignoring pretences and thumbing my nose at authority but now look at me. And I'm only just starting to learn how mortgages do horrible things to people. The banks will probably have me in a dress by the end of the month. Then when I finally do own a home I'll become a petty neighbourhood tyrant in a myopic quest to protect my 'investment' over all else.
You give them access to your bank and they say they can boost your score by sharing the payment details. Unless they find it's bad in which case they won't. Anyone else find that a bit creepy, giving big data access to your bank history and then expecting it's scoring to be accepted when it only shows the good?
